1. CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 1-3 Journalizing and Posting Cash Payments

2. CENTURY 21 ACCOUNTING © Thomson/South-Western 2 LESSON 9-2 CASH PAYMENTS JOURNAL  All cash payments are recorded in the cash payments journal  A special journal used to record only cash payment transactions is called a cash payments journal  Checks are the source documents for most cash payments  The cash payments journal contains columns for general journal transactions, accounts payable, purchases discount and cash  A journal amount column that is not headed with an account title is called a general amount column

3. CENTURY 21 ACCOUNTING © Thomson/South-Western Cash Payments on Account Purchases on account are expected to be paid within the stated credit period A seller may encourage early payment by allowing a deduction from the invoice amount A deduction that a vendor allows on the invoice amount to encourage prompt payment is called a cash discount A cash discount on purchases taken by a customer is called a purchases discount 3 LESSON 1-3

4. CENTURY 21 ACCOUNTING © Thomson/South-Western Purchases Discounts Purchases discounts are usually stated as a percentage 2/10, n/30 2/10 - 2% of the invoice amount may be deducted from the amount due if payment is made within 10 days of the invoice date n/30 – payment of the total invoice amount must be made within 30 days of the invoice date A purchases discount reduces the net amount of cash paid for a purchase Purchases discounts are in the cost of merchandise division on the income statement 4 LESSON 1-3

5. CENTURY 21 ACCOUNTING © Thomson/South-Western 5 LESSON 1-3 June 1. Paid cash on account to AudioMax, $514.50, covering Purchase Invoice No. 331 for surround sound audio equipment for $525.00, less 2% discount, $10.50. Check No. 315. 1.Write the date.4.Write the debit amount. 3.Record the check number. 2.Enter vendor name. 6.Enter the credit amount. 5.Record the discount amount. JOURNALIZING A PURCHASES DISCOUNT page 19 234561

6. CENTURY 21 ACCOUNTING © Thomson/South-Western 6 LESSON 1-3 June 2. Paid cash on account to Western Digital Systems, $781.55, covering Purchase Invoice No. 336 for video equipment for $845.00, less Debit Memorandum No. 22 for $47.50, and less 2% discount, $15.95. Check No. 316. Amount owed on invoice: Original Purchase Invoice Amount (P336) Purchase Invoice Amount After Return Purchases Return (DM22) –= $845.00 – 47.50 = $797.50 × 2% = $15.95 – $781.55 = $797.50 Purchases discount: Purchase Invoice Amount After Return Purchases Discount Purchases Discount Rate ×= Amount due after purchases discount: Purchase Invoice Amount After Return Total Amount Due Purchases Discount –= TAKING A DISCOUNT AFTER A PURCHASE RETURN page 20

7. CENTURY 21 ACCOUNTING © Thomson/South-Western 7 LESSON 1-3 June 2. Paid cash for administrative supplies, $136.00. Check No. 317. RECORDING ENTRIES IN A CASH PAYMENTS JOURNAL page 21 1.Write the date. 2.Enter the account title. 3.Record the check number. 4.Write the debit amount. 5.Enter the credit amount. 12345

8. CENTURY 21 ACCOUNTING © Thomson/South-Western 8 LESSON 1-3 June 30. Paid cash to replenish the petty cash fund, $402.00: administrative supplies, $300.00; advertising expense—video, $56.00; miscellaneous expense, $46.00. Check No. 350. 1.Write the date. 3.Record the check number. 2.Enter account titles. 4.Write the debit amounts. 5.Enter the credit amount. CASH PAYMENT TO REPLENISH PETTY CASH page 22 1 45 2 3

9. CENTURY 21 ACCOUNTING © Thomson/South-Western 9 LESSON 1-3 POSTING FROM A CASH PAYMENTS JOURNAL page 23

10. CENTURY 21 ACCOUNTING © Thomson/South-Western 10 LESSON 1-3 TERMS REVIEW cash discount purchases discount petty cash page 24